An 11.5% appreciation of the rupee from its lowest against the dollar in August last year and the chances of its strengthening further in the coming months have exporters worried.

A strong rupee will hit textile and garment exporters as currency hedging is largely absent with most players and margins are already under pressure due to tough competition from countries like Bangladesh. In the case of gems and jewellery and electronics exporters, the high import content would partly offset the adverse impact of a strong rupee but if the currency gains further, the net impact would indeed be negative.

In textiles and garments, there is an overwhelming presence of unorganised players, accounting for roughly 80% of the garment and 90% of the fabric segments. These units don’t hedge against currency fluctuations and resort to limited imports of raw materials. The sector is crucial as it accounted for 10.54% of overall exports last fiscal and it employs 35 million people, having become the largest employer after agriculture.

Exporters of electronics products and traditional sectors like gems and jewellery, handicrafts, carpets, leather and marine products have also taken a hit in their margins.

Sumit Keshan, chief financial officer of Gokaldas Exports, said in times of sharp sharp volatility in the rupee movement, even hedging becomes difficult. “In the short term, we as a company are not affected as we have a strong hedging policy. However, if the appreciation continues beyond that, not just us, most of the players are going to be affected,” he said.

The country’s overall exports grew at double digits for four months starting July this fiscal, enabled by the rupee’s depreciation, among other things.

However, the pace of growth slowed after the rupee started strengthening a bit from the record low in August, which finally resulted in a negative growth of 3.7% in February. The export target of $325 billion for 2013-14 is set to be missed as outbound shipments until February were to the tune of $282.7 billion.

“One of the major reasons for the pick-up in textile and garment exports in recent months is the depreciation of the rupee. If the rupee appreciates to, say, the 56 level, the profitability of the sector, which is even less than 10% from a year before even after the latest surge in exports, will be neutralised. In garments, it could also hurt our competitiveness compared with Bangladesh further, which enjoys low labour